Wednesday, November 08, 2006

China's "Green" Investment to Outpace GDP Growth

By Ling Li

Created Nov 7 2006 - 5:29am

China’s investment in environmental protection is projected to grow
faster than the county’s gross domestic product (GDP), according to Jun
Ma, Greater China chief economist with Deutsche Bank. By 2010, “green”
investments will account for 1.6 percent of Chinese GDP, or 1.9
trillion yuan (US$242 billion), growing at an average rate of 16
percent a year until then, China Securities Journal [1] reports Ma as saying. GDP, in contrast, is expected to grow by 10.6 percent in 2006 and 9.5 percent in 2007, according to Deutsche Bank [2].

The severe pollution of northeast China’s Songhua River
[2] last November, and similar incidents since then, have focused broad
attention from politicians, citizens, and nongovernmental groups on the
nation’s deteriorating environmental situation. The Chinese government,
in response, has begun investing large sums of money in environmental
protection.

The recent China Green Accounting Study Report 2004 [2],
issued in September by China’s State Environmental Protection
Administration (SEPA) and National Bureau of Statistics (NBS), shows
that economic losses caused by environmental pollution in 2004 reached
511.8 billion yuan (US$65 billion), while the cost of treating and
disposing of the pollutants was 287.4 billion yuan (US$36.5 billion).
This represented 3.05 percent and 1.8 percent of Chinese GDP,
respectively. Converting this cost to the one-off investment required
to clean up all pollutants from point or non-point sources would have
required investments totaling 1 trillion yuan (US$127 billion),
according to Yue Pan, vice minister of SEPA. But, Pan noted, the
Chinese government invested only 190 billion yuan (US$ 24.1 billion) in
treatment that year, less than 20 percent of the estimated required
cost.

Ming Lei, a follower of the “green accounting” school
and a professor at Peking University, agrees that the 2004 pollution
figures indicate a serious lag in the government’s real spending on
environmental protection. Lei noted that this gap could have
irreversible effects on both the environment and human health, even
offsetting the growth of GDP, according to People’s Daily [3].

Four
industries—wastewater treatment, air quality improvement, natural gas,
and renewable energy—will be the main beneficiaries of the government’s
burgeoning green investment program, with annual growth rates ranging
from 20 to 35 percent over the next five years, according to Ma.
Investments in water treatment, for example, grew by roughly 23 percent
over the past three years, but are expected to increase by another
25–30 percent in the next five years. In the area of air quality
improvement, the government has required that all facilities located in
sulfur-dioxide and acid-rain control areas install sulfur removal
devices. Investment growth in the area is expected to be between 20 and
25 percent annually through 2010.